UK may need stick rather than carrot to get firms to deal with gender pay gap

British employers are proving slow to comply with rules that require them to disclose differences between how much they pay men and women. They may be even slower to close that gap if the laudable push for transparency is not backed up by the threat of eventual sanctions.

The UK government in April gave organizations with at least 250 employees one year to disclose their gender wage gap. By mid-October, less than six months before the deadline, only 2 percent had done so. Extrapolating from such a small sample is difficult but it’s already clear that organizations where women both earn more than men on average and are overrepresented in the top pay quartile are rare. Yellow Dot, which runs nurseries, and The Commission for Equality and Human Rights are among the exceptions.

That tallies with statistics for the whole economy from the national statistics office, which show that men are on average paid nearly a fifth more than women even though the differential is at its narrowest on record. Women are more likely to be employed in low-paid sectors and rack up fewer hours at work. But even stripping out part-time work, the median hourly gap between male and female pay is 9.4 percent.

The idea is that transparency at the company level will give women leverage to fight pay inequality. But Austria’s experience suggests otherwise. Its wage gap – one of the highest in Europe – has dropped just 2 percentage points to 21.7 percent since similar rules were introduced six years ago. First, it’s primarily highly educated women seeking out the data. Second, few companies are doing much about their findings.

Granted, the British data will be published online rather than being held by internal work councils as in Austria. Media scrutiny and competition for the best talent might nudge companies to change. For example, an accounting graduate can now see that PwC offers higher mean wages and bonuses to female employees than rival Deloitte and promotes more women to top posts.

But closing the gender pay gap will also require changes to corporate cultures where men are more likely than women to climb the greasy pole. Governments are becoming more interventionist when companies pollute the environment or fail to pay enough taxes. Pay gaps may be another issue which may be fixed quickest by using sticks rather than carrots.